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OpEdNews Op Eds    H3'ed 5/23/11

A Progressive's Critique of the Ryan, Obama and "People's" Budgets

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Message Evan Geraniotis
We present a critique, from a progressive's perspective, of the three plans that have been put forward in the context of the negotiations for the 2012 Budget and beyond: GOP Rep Ryan' s Budget, President Obama's Budget and the "People's Budget" by the Congressional Progressive Caucus. We judge the GOP Plan as being both fiscally irresponsible and a declaration of class war against the middle class, the elderly and the poor; the Obama Plan as timid on economic growth but relatively balanced in its goals, though it does not balance the deficit; and  "People's Budget" as one that balances the budget the fastest, while also promoting a pro-growth agenda.  Both the Obama and "People's" Budgets  preserve the social safety net which the GOP Plan dismantles in favor of vouchers for Medicare and block grants for Medicaid.

GOP Ryan's Fiscally Irresponsible Budget Plan Declares Class War on the Elderly and Poor  

Rep Ryan' s (R-WI) budget, recently voted by the GOP House majority, replaces Medicare with a voucher system, Medicaid with block grants to the States, both in the name of fiscally responsibility. The cuts to both programs are very significant and the benefits to seniors are much reduced over time, but thanks to the generous tax breaks offered the debt still increases and the budget is not balanced till 2034.  The plan is characterized by fiscal irresponsibility and amounts to declaring class war on the elderly and the poor.

In fact the GOP Budget accumulates $14 trillion in debt by 2034 and more than triples the yearly interest payment on the debt  from $212 billion in 2011 to $700 billion in 2021.  For the period 2012 - 2022 it dictates decreasing tax revenues by $4.2 trillion and cutting spending by $5.8 trillion; this reduces the debt by $1.6 trillion from the projected baseline, but still adds $5.7 trillion to the national debt.

The GOP spending cuts of the first decade include $100 billion cuts in Medicaid per year, slashing VA by $19 billion, slashing education spending  by 36%, transportation spending by 41% and energy spending by 70%.   Overall discretionary spending is cut by 25%.  Low income housing, Pell grants, food stamps are slashed.  In addition, in the second decade cuts in Medicare kick in at an average level of $165 billion a year. All along there are practically no cuts in our excessive defense spending. 

Instead of supporting investments in education, innovation and infrastructure so as to increase our global competitiveness and win the future by out-education, out-innovating and out-building the rest of the world, as President Obama called in his SOTU address of January 26, the Ryan budget plan slashes or eliminates all such efforts. Moreover, the plan makes no effort to curtail the ongoing off-shoring of jobs, it offers no disincentives to US multinationals to stop expanding only overseas, or incentives for them to repatriate capital and invest in plants and jobs on American soil.

Extending the Bush tax cuts for the top 2% of earners ($70 billion per year) and offering tax credits and subsidies for corporations operating in US and overseas ($80 billion per year) reduces revenues by $1.5 trillion in 2012-2022.  Continuing the Bush tax cuts and AMT relief for 98% of us reduces revenue by $3 trillion more. Repealing Health Care Reform  also denies $480 billion in savings.  In the second decade, it offers $1.72 trillion in tax breaks for top earners and corporations while cutting $1.65 trillion from Medicare.  These Medicare cuts coupled with a $2 trillion cut from Medicaid over two decades will result in significant loss of benefits for seniors and the elderly poor.

Overall the Ryan budget keeps federal revenues at 18% of GDP and spending at 20% of GDP or less until balanced. This spending level is lower than even the 22% under Reagan, when America's population was much younger. Combined state and federal spending falls to 32% of GDP from 37% currently.  By contrast all advanced industrialized nations spend considerably more for their citizens: UK at 51% of GDP, Eurozone (average) at 50.7%, Germany at 47%, Canada at 43.5% and Japan at 40.7%. When other advanced nations continue to invest in their people and in furthering the development and growth of their economies, Ryan wants us to stop all our pro-growth investments and limit drastically our spending for the few ones that we have already undertaken.

Specifically, for two key ingredients of the social safety net, Medicare and Medicaid, GOP Ryan's budget plan dictates the most drastic and painful transformation in their 60-year history.  Medicaid is replaced by block grants to States with funding slashed by $2 trillion over the next two decades.  Medicare is turned into a voucher program with funding reduced by $1.65 trillion in 2022-2032 alone. And all this, as we stated already, when over the next two decades GOP budget offers over $3.2 trillion in tax breaks to the wealthy, near wealthy, and corporations.

States will be receiving block Medicaid grants to disperse as they see fit; $100 billion per year in cuts must be absorbed in 2012-2034.  States have been reducing budgets by $110 billion in 2011 resulting to reductions in benefits and services provided, after the $300 billion assistance from the 2009 Stimulus expired in late 2010. Governors of several Red States have been slashing programs and benefits for the poor and elderly, while lowering corporate state taxes. These trends will  now spread and intensify. Sanitation, medical care standards, and services in nursing homes will decline dangerously.

During the second decade, Medicare funding gets slashed at a rate of $165 billion per year, while the wealthiest 2% and corporations receive $172 billion in tax breaks.  Seniors will receive vouchers to buy health care from private insurers.  This privatization will cost more and reduce benefits to seniors. Existing programs involving private insurance such as Medicare Advantage cost taxpayers 10 % more than Medicare. According to nonpartisan CBO , in 2022 new enrollees will have to pay at least $6,400 more out of pocket to buy coverage comparable to today's, and by 2030 vouchers will only cover 1/3 of health care costs.

The GOP plan also repeals the 2010 Affordable Care Act ( ACA ); this will eliminate subsidies for closing the doughnut hole in drug prescription costs and remove several cost control mechanisms that ACA entails, such as large patient pools with collective bargaining for health care plans and the independent board that would monitor whether Medicare is on track to meet spending targets. GOP' s philosophy of treating health care as a financial transaction and patients as consumers will not work; consumer-based medicine has been a bust everywhere it has been tried.

Finally, under GOP's plan federal mandatory spending for health care would fall from the current 12% of GDP to 6% in 3030 and 2040 and 5% in 2050. This is the wrong trend, as our population ages, income inequality persists, and health costs rise. More importantly, when the savings from these cuts are passed as tax breaks to the wealthy and corporations this becomes a declaration of class war against the elderly and the poor.   

President Obama's Budget Plan Strikes a Balance, is Timid on Growth

The President's budget proposal does not provide all the specifics but it does provide guidelines on key aspects of the budget.  President Obama has proposed a balanced approach for $4 trillion in deficit reduction over 12 years from the projected budget baseline of 2011 adjusted for inflation, while incorporating the values of shared responsibility and shared prosperity. The President's approach draws on the recommendations of the Bipartisan Fiscal Commission and adds to the $1 trillion in deficit reduction included in the President's 2012 budget. At the same time, the President's budget protects America's commitments to senior citizens, and makes some targeted investments needed to support economic and job growth.

President Obama's vision stands in sharp contrast to the House Republican plan, which lays the burden of debt reduction on those who can least afford it. GOP Ryan' s plan discussed in some detail above ends Medicare and Medicaid as we know them and increases health care costs for seniors in order to support almost $3.2 trillion (in the first two decades) worth of tax cuts for the wealthiest Americans and the big corporations.

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EVAN GERANIOTIS holds Master of Science and Doctoral degrees in Electrical Engineering from the University of Illinois in Urbana-Champaign and Bachelor's and Master's degrees from Polytechnic School of Athens, Greece. He served as a Professor of (more...)
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